The UK's communist housing market is ripe for revolution
Matthew Brooker
IMAGINE going to buy a new car and finding there were only three or four models available, all in the same colour. Or visiting the local supermarket and discovering the shelves were stocked only with one variety each of bread, meat and vegetable. A flashback to the communist countries of the former Eastern Bloc? Try the UK’s new-build housing market in the 21st century.
Britons buying new homes mostly do so from a small group of big companies that develop large sites of hundreds of similar-looking houses. It’s a model more reminiscent of the production-led planned economies of the former Soviet Union than the small-business entrepreneurialism that Britain’s ruling Conservative Party likes to champion.
Key features are inadequate supply, limited choice and lack of responsiveness to consumer demand. The housing secretary, Michael Gove, has railed against the ugliness and poor quality of “identikit” estates churned out by the industry.
Not all property markets in developed nations work this way. In fact, most don’t. In Germany, you can go to a website and pick from among 2,400 house designs and 350 construction companies that will build to your specification.
This is the self-commissioned housing market, and it’s how more than half of German homeowners buy property. The model is common across Europe and other parts of the world, accounting for 60 per cent of the market in Austria, 51 per cent in Japan, 36 per cent in Poland and 31 per cent in France. In the UK, the share is 5 per cent.
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Do most UK homebuyers realise how different the market is from other countries? I doubt it; otherwise there would be greater clamour for change.
People buy new-build houses because that’s what the developers are selling. If you want a new home, then for most people this is the only way of getting one.
Many avoid them, though, deterred by uniform output, small rooms and tales of poor workmanship. Only 33 per cent of people would consider buying a new-build, according to research by the Home Builders’ Federation, the trade body for big developers. I’m with the majority: When my family was looking for a home last year, we settled on a property that was built almost a century ago.
This bias against the new is an anomaly. In most areas of life, newer means better. Look at how cars, telephones or vacuum cleaners have changed compared with 40 or 50 years ago.
Quality and variety tend to improve as manufacturing knowledge and experience advance, and as competition pushes companies to innovate. In Britain, lack of competition has reduced the pressure for the construction industry to move up that curve.
The market has become increasingly consolidated. As recently as 1988, small- and medium-sized developers built two-thirds of all homes in the UK; that has since shrunk to barely 12 per cent, according to a 2021 government-commissioned review of the custom and self-build housing market.
The share of planning permissions taken up by developments of more than 500 units more than doubled in the decade through 2021, while the proportion of small plots numbering 10 houses or fewer shrank by half.
Meanwhile, advances in building techniques have failed to take hold. Modern methods of construction (MMC) – an umbrella term that covers various forms of prefabricated, modular and factory-produced housing elements – are central to the self-commissioned housing market in continental Europe.
MMC housing is more energy- and labour-efficient, more environmentally friendly, and allows far greater design customisation than large-volume housebuilding. Yet it hasn’t made significant inroads in the UK despite government policy support.
The absence of self-build is the “biggest single difference” between the housing markets of Britain and other developed countries, Andrew Baddeley-Chappell, policy director of the National Custom and Self Build Association, told me. Self-commissioned housing represents a “massive missing market,” he said.
The reasons why self-build has failed to take off in Britain are manifold and interlocking. It isn’t easy to unbake a cake. The market has evolved in response to existing incentives that favour large-scale housebuilders – particularly in the critical area of land supply and negotiating a complex and time-consuming consent-based planning system.
To go mainstream, self-commissioned housing needs to simultaneously overcome several challenges, among them: securing far greater access to land; overcoming “not in my backyard,” local resistance to development; changing the poor image of new-build homes in the minds of consumers; and convincing lenders to finance self-build projects.
The prize for success would be considerable. Besides leading to more attractive and varied urban landscapes, it would add another channel of supply in a country that has consistently failed to meet the government’s target of building 300,000 homes a year.
If self-commissioned housing contributed to 40 per cent of supply that is the average for developed nations, that would be more than 90,000 units annually. A bigger self-build sector would also reinvigorate the ranks of SME construction companies, which are again suffering as the property market slows.
It’s a deep irony that, four decades after Margaret Thatcher’s landmark initiative to create a new property-owning class by selling off social housing, and almost 14 years into the current stretch of Conservative government, Britain has a new-build housing market that is more Stalinist than Thatcherite.
In effect, the country gets the worst of both worlds: a system in which the output resembles the result of central economic planning, but where the supernormal profits of the producers land in private rather than public hands.
When markets fail, governments need to intervene. The opposition Labour Party is favoured to win a general election expected to be held this year, and its immediate focus – understandably – is likely to be on mass delivery of affordable housing.
But a thriving self-commissioned homebuilding sector could still play a part in alleviating the housing crisis, as well as reviving competition and lifting consumer satisfaction. Britain’s communist housing model is ripe for a capitalist revolution. BLOOMBERG
Matthew Brooker is a Bloomberg Opinion columnist covering business and infrastructure.
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